Mineral Rights Brokers
Picking a mineral rights broker is an important step.
When selling mineral rights in Texas, you want to pick a mineral rights broker who is going to help you sell for the best price. Equally important, you want a mineral rights broker who will guide you through the process.
Why use a Mineral Rights Broker?
Should you even bother using a mineral rights broker?
There are a number of reasons why using a mineral rights broker makes sense. Here are some common reasons to use a mineral rights broker:
Competition: The most important reason to use a mineral rights broker is competition. A lot of mineral owners get a few offers in the mail, reach out to a few mineral buyers online, then accept the best price they find. You will nearly always sell below market value doing this. There are thousands of mineral buyers. You simply can’t individually reach out to enough mineral buyers on your own to find a fair price.
Price: Related to competition, another important reason to use a mineral broker is price. A mineral rights broker will create competition for your mineral rights which drives the price higher. In addition, a good mineral rights broker will have access to mineral buyers you simply can’t find on your own. Did you know that a lot of private equity backed mineral owners do not have any type of website? They rely on Texas Royalty Brokers to bring them high quality deals. These are the types of buyers who pay the best prices.
Save Time: Let’s assume you spend time researching buyers online, reaching out, providing documentation, and then discussing and negotiating those offers with the buyers. This is going to take you a lot of time. You will spend weeks just doing the research. You will spend hours and hours of time and reach less than 1% of the mineral buyers out here. After all that, you will make less money. It simply doesn’t make sense to waste all of your time doing it yourself and then end up walking away with less money.
Purchase and Sale Agreement: The purchase and sale agreement is an important document. This document will define how the sales process takes place. The due diligence period, price, price adjustments, and many other important details are in this document. A mineral rights broker will guide you through this document and ensure your interests are protected. Unless you have completed multiple mineral rights transactions in the past, you can easily miss something that will cost you thousands of dollars.
Escrow: When you sell mineral rights on your own, the mineral buyer will require you to sign and notarize the deed and send it to them before they pay you. This means you are sending them the legal document that transfers the ownership before you have been paid. This is a big risk. At Texas Royalty Brokers we have an escrow process to ensure you get paid before they get the deed.
When you think about whether to use a mineral rights broker, think about selling a home. Would you sell your home without a real estate agent? Over 89% of people use a real estate agent to sell their home.
For some reason, a lot of mineral owners believe they can sell mineral rights on their own. A mineral rights transaction is much more complicated then selling a home. There is no regulation in this industry. This means there is no one looking out for you if you do this yourself.
If you are like most mineral owners, selling your mineral rights is a life changing decision. At the very least, the value is a significant portion of your retirement planning. Do not leave a transaction like this to chance. You need an advocate in your corner to help you get the best price and protect your interests.
At Texas Royalty Brokers, we typically get mineral owners who list with us 10% to 50% higher prices. If you’re thinking about selling mineral rights, save time and make more money by listing mineral rights with our company.
When you should NOT use a mineral rights broker
Our team has been helping mineral owners sell mineral rights since 2012. In all of our years of experience, the only individuals we recommend sell mineral rights on their own are full time mineral rights investors.
Unless you have completed multiple purchases and you are intimately familiar with the market, you should be utilizing a mineral rights broker.
Even sophisticated mineral rights investors utilize mineral rights brokers. Why? For all the same reasons listed above. It saves them time and they make more money. If you’re going to save time and make more money, it simply makes sense to use a mineral rights broker in Texas.
How to Pick a Mineral Rights Broker
When picking a mineral rights broker, there are a few things you should watch out for. As you consider your options, take the following things into consideration:
Local: You want a mineral rights broker who knows your market. At Texas Royalty Brokers we specialize in brokering mineral rights exclusively in Texas. By focusing exclusively on Texas, our company has formed long term relationships with Texas mineral buyers. In addition, our network of thousands of Texas mineral buyers means increased competition and better pricing for you.
Deal Size: Some mineral rights brokers will take any deal they can get. This means they are busy handling a $25,000 deal at the same time they are working on your $2,500,000 deal. These brokers are focused on volume over quality service. You want a broker who is going to devote their time and resources to your sale. At Texas Royalty Brokers, we focus exclusively on high value sales. This means our team can put their time and effort into maximizing the value for you.
Listings: Any “mineral rights broker” who does not have listings available on their website should be avoided. The goal as a mineral rights broker is to attract mineral buyers and create competition. How can you do this if there are no listings on your website? A lot of mineral buyers claim to be mineral rights brokers, and do not have any listings on their website. Once you list, they simply make you an offer from one of their entities.
Active Marketing: Once you list, what is your mineral broker going to do to generate interest from mineral buyers. Most mineral brokers are going to send an email to buyers. That’s it. You need a mineral broker who is going to actively market your mineral rights. This means researching buyers who recently purchased in the area, mailing marketing material, running ads, making phone calls, and of course sending an email to buyers.
Website Quality: Website quality is subjective. However, take a moment to really dive into the mineral brokers website. Is it just a simple website with a few pages? Do they have helpful information to help you understand what you’re getting into? Is the design old and stale or modern and intuitive? By simply comparing websites you can typically tell which brokers are taking the time to do things right.
These are a few of the most important things you should look out for when picking a mineral rights broker.
The most important thing to understand about commission is that every broker charges a commission.
The question is simple. What % of commission is going to be taken out of the transaction?
The industry standard for mineral rights brokers is a 6% to 10% commission. A “free” mineral rights broker will charge anywhere from 10% to 40% commission.
Here are three tricks mineral brokers use to hide their commission:
Trick #1 – “Free” Mineral Rights Brokers
A lot of mineral brokers, especially individuals, will claim that they are free. No mineral broker is free.
Here is what happens:
A “free” mineral rights broker will market your mineral rights. Typically to just a handful of buyers. They will bring you an offer of say $5,000/acre. You accept the offer. The mineral buyer was willing to pay $6,000/acre. Once you sign the contract at $5,000/acre, the mineral broker will get paid the extra $1,000/acre the mineral buyer was willing to pay.
This means you just paid a 20% commission rate!
In addition, this means you are negotiating against the mineral buyer AND against your broker.
The mineral broker is trying to maximize their commission. They are not trying to maximize the sales price for you. This means they are going to try and get you to take the least amount possible so they can get a higher commission.
Trick #2 – Split Commission Brokers
Some mineral rights broker will claim that the commission is split between buyer and seller. This is false. A mineral buyer is going to pay a certain price for your mineral rights in total (including commission). A mineral buyer does not simply add additional money to what they are willing to pay for your mineral rights to cover commission.
If the buyer is paying 3% commission and the seller is pay 3% commission, a total of 6% of the total amount being paid by the buyer is going to commission.
At the end of the day, the total amount of commission coming out of the transaction is 6%. Don’t let the commission split fool you.
Trick #3 – Buyer Paid Commission
Mineral brokers will often claim the mineral buyer pays the commission. This is true. However, just because the mineral buyer is paying the commission rate it does not mean that the transaction is free for you.
A mineral buyer is going to analyze your ownership and come up with their maximum offer. This is the total amount they are willing to pay. The mineral buyer will not magically add commission on top of this number.
Once an offer is presented to your broker, they will deduct the commission out of the highest offer from the buyer and present the offer to you net of commission. This means the commission cost has been taken out when you get the offer. The mineral buyer might pay the commission, but ultimately you still got less than the total amount of the offer. This means the commission directly reduces how much you receive at closing and is a true cost in the transaction.
Transparency is Key
A quality mineral rights broker is going to clearly state their commission rate. Avoid any mineral rights broker who claims to be “free” or won’t clearly state their commission rate.
At Texas Royalty Brokers, our commission rate is clearly stated at 5%. You can read more about this on our cost to list page.
Is commission worth it?
No one wants to pay a commission. However, a quality mineral rights broker is worth it.
Even after taking commission into consideration, you will save time and make more money using a mineral rights broker.
A quality mineral rights broker is going to require exclusivity to list. Why?
The reason is that mineral rights brokers don’t work for free. Imagine you were selling your home. Would you expect a real estate agent to spend their time and resources marketing your home without an exclusive? Not a chance.
Exclusivity allows a broker to do two important things:
Quality: When you sign an exclusive with a broker, it tells mineral buyers that you are a serious seller. A lot of mineral owners are just kicking the tires. They are more curious about what their mineral rights are worth than actually selling mineral rights. Exclusive listings show buyers you are serious allowing them to put the time and effort into analyzing your ownership. If a broker has exclusive listings that can’t be found anywhere else from legitimate sellers, this attracts mineral buyers and leads to better pricing for you.
Resources: A mineral brokers can’t put time and effort into actively marketing your mineral rights if you aren’t exclusive. The reason is obvious. If a mineral broker is spending substantial money to run ads, make calls, send out letters, etc marketing your mineral rights, and then you simply work out a deal with one of those buyers directly, the broker just wasted thousands of dollars. Committing to sell through a mineral rights broker in Texas allows them to commit their time and resources to your ownership.
If you are looking for a mineral rights broker that doesn’t require an exclusive, there are a few out there. However, they are low quality junk listing sites. The best mineral buyers know which sites post junk listings and they don’t bother looking at them. You may get your mineral rights sold, but it will be a below market sale.
Questions about Mineral Rights Brokers
The mineral rights industry is unique. Picking the right mineral rights broker can be challenging.
At Texas Royalty Brokers we are dedicated to looking out for mineral owners best interests. Our goal is to help you sell for the best price while receiving an industry low 5% commission rate. We want to help you maximize the value of your mineral rights when you sell.
If you’re thinking about selling mineral rights, reach out to us using the form below. Our team will quickly be in touch to discuss.